By Claire West

The margin between mortgage rates and the cost of funding to lenders through the swap rate market today stands at an all time high.

Average Rate Swap Rate Margin

2 Year Fixed 4.55% 1.26% 3.29%
3 Year Fixed 5.13% 1.56% 3.57%
5 Year Fixed 5.48% 2.13% 3.35%
Source: 19.8.10

Two years ago the margin on a two year fixed deal stood at 1.28%, compared to 3.29% today.

The increase in margin means that on a £150,000 mortgage, a borrower is repaying £149 per month more, equivalent to an additional £3,576 over the two year term.

Michelle Slade, spokesperson for, commented:

"While the cost of swap rate funding stands at an all time low, the margin taken by lenders has hit an all time high.

"Mortgage rates are falling, but only a fraction of the reduced funding cost is being passed on as lenders continue to repair their balance sheets.

"Borrowers will be angered that they continue to pay the price for mistakes made by lenders, particularly those who have accepted government funding.

"Mortgage availability and the amount lent continues to improve, but the market still has a way to go before any reasonable normality is returned.

"Swap rates are the traditional barometer of fixed rate mortgages, but with lenders still nervous of entering the money markets many are opting for on balance sheet funding through their savings book.

"While the margin between fixed rate savings and mortgages is lower, it is steadily increasing again.

"The mortgage rates on offer at present are typical of what borrowers expected to pay when bank base rate was higher.

"Borrowers could see interest rates as high as 8% if bank base rate rises as quickly as it fell and lenders retain these record high margins."